Michigan Education Retirees Lose Health Cost Increase
Challenge

June 29, 2005 (PLANSPONSOR.com) - A group of
Michigan public school retirees has come away empty-handed in
its legal battle challenging increases in health care
deductibles and copays as unconstitutional.

>The group’s setback came with a Michigan Supreme
Court decision rejecting the retirees’ contention that the
deductible and copay hikes illegally shifted the burden of
health care costs from employers to retirees.

>In a split 5 to 2 decision, the state’s high court
asserted that the Michigan constitution protected an
“accrued financial benefit” from being decreased and that,
unlike pension payments, health care coverage doesn’t fit
into that category. Employer health care coverage benefits
are “nonmonetary” and don’t increase over time as the
worker progresses through his or her worklife, justices
told the six retirees.

>Chief Justice Clifford Taylor, writing for the
majority, said that the state legislature never intended to
be bound by a contract when it began providing health care
for public school retirees. To hold otherwise would
“swallow the right of the people to change the court of
their governance,” Taylor wrote. “Deprived of this right,
self-government is not just hollow, it is nonexistent,” he
said.

>The state-run Public School Employees Retirement
System handles retirement benefits for 145,000 retirees and
beneficiaries from 557 school districts statewide, 59
charter schools, 57 intermediate school districts, seven
universities, 28 community colleges and 11 libraries. In
2000, the plan modified retirees’ deductibles and copays
by hiking the annual deductible from $145 to $165 for
an individual and $290 to $330 for a family, prompting the
lawsuit.